Dairy farmers explore option of selling cows as milk prices plummet

Soy milk, a popular alternative option for more than four decades, was found to be the most comparable to cow’s milk in terms of overall nutrient balance
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Dairy cows look out from their stalls Friday, Jan. 26, 3018, on Elmer K. King's Leacock Township farm. The Ronks-area dairyman recently began shopping for a buyer for his 48 milking cows, an unwilling step to exit the dairy business forced by a three-year, downward spiral in milk prices and a new projection that 2018 might be the worst yet. (Blaine Shahan/LNP via AP)(Photo: Blaine Shahan, AP)

LANCASTER (AP) — The long, proud tradition of Lancaster County as the state's dairy capital may take a hit in the next six months as milk farmers like Elmer K. King reluctantly empty their barn stalls.

The Ronks-area dairyman recently began shopping for a buyer for his 48 milking cows, an unwilling step to exit the dairy business forced by a three-year-downward spiral in milk prices and a new projection that 2018 might be the worst yet.

"I'd rather keep on going," the longtime dairyman says, "but I don't see any milk futures as being profitable, so there's no sense in keeping cows. It's not profitable.

"It does make me sad. I got into the dairy business with my dad and have been doing it all my life."

Local agriculture lenders, ag leaders and politicians fear the next six months may bring an unprecedented sell-off of dairy herds in Lancaster County.

The exits are expected to be mainly by younger dairy farmers and those renting farms who don't have the equity built up to weather the storm any longer.

"As farmers use up the forage they produced last fall and are stored in silos, you're going to see them just sell their cows. It's the young farmers trying to start up. They're not going to stick around," predicts state Rep. David H. Zimmerman of East Earl.

"In Lancaster County you won't get dairy cattle back into those farms. The farmland will be cash-cropped or used for produce farming, maybe tobacco. We could lose a whole generation of young farmers.

No short-term solution

Zimmerman, who grew up on a dairy farm and spent most of his career in ag sales, has been meeting in recent weeks with dairy groups, dairymen and Pennsylvania's agriculture secretary in an urgent attempt to head off the exodus.

How to bring a milk-processing plant to Lancaster County is near the top of the Plain Sect community's questions. So is what dairymen can do to keep from losing a cherished livelihood.

Selling cows, not farms

Most of the impending selloffs will be of dairy cows and equipment, not the farms themselves, local experts say.

"Selling farms would be a last resort. There are other things they will check into before liquidating," observes Christ.

For example, King, the Ronks dairyman preparing to unload his cows, will keep his farm, renting out part of it, growing produce and possibly getting a nonfarm-related job.

He had hoped his 21-year-old son, the eldest of seven children, would join him in the dairy business, but his son chose to go into the fence-building business instead.

Dad understands.

"He sees too much debt loads on farms," King says.

Low prices for cows

With interest in expanding milk production waning, local farmers who do decide to bail out will not get good prices for their cows and equipment.

With no demand for milk cows, most farmers will be forced to sell their herd as beef cattle at prices much lower than what they originally paid.

With little return on big investments because of low milk prices, dairy farmers are in a particularly bad spot, agrees Mike Firestine, senior vice president of Fulton Bank, which does considerable ag lending.

"We're encouraging farmers to look at every opportunity to get through the next several months. But, unfortunately for some farmers, it's an exit strategy."

"It is very sobering to say the least. Our family dairy farms are capital intense, whether buying cows or equipment, and the returns on investments are not immediate. Basically, they are buying retail and selling wholesale," he says.

At the Center for Dairy Excellence, a nonprofit group created by the state to make dairy farming more profitable, more calls than ever are coming in for help in holding off the hard times.

"We're encouraging farmers to look at every opportunity to get through the next several months. But, unfortunately for some farmers, it's an exit strategy," says Jayne Sebright, the center's executive director.

Requests by farmers to use the center's financial consultants to get through the hard times — or prepare an exit plan — were up 15 percent last year and have never been in such high demand, Sebright says.

The last good year for high milk prices that benefited dairy farmers was in 2014, when exports of milk were robust. Since then, foreign milk has ramped up, decreasing the need for U.S. milk, even while consumption has fallen at home.

The milk industry blames federal rules in 2012 that eliminated low-fat flavored milk from school meal and a-la-carte programs as an unnecessary step that has drastically reduced milk demand in the U.S.

In November, the feds began allowing 1 percent flavored milk in school meals. And U.S. Rep. Glenn Thompson of Bellefonte in October introduced legislation to further expand milk consumption and choices in schools.

Soy and almond milk also has cut into the nation's appetite for cow milk.

"A lot of consumers are being misled by soy and almond milk," says Dave Smith, executive director of the Pennsylvania Dairymen's Association. "It's really a juice, and it doesn't have the nutrient value of milk."

Bad outlook for 2018

Not unexpectedly, the prices that dairy processors pay farmers for milk have fallen steadily. And the projection for 2018 is that milk prices will fall even more.

Scant profit margins particularly pinch small dairy farmers, such as those in Lancaster County, that lack the economies of scale of large milk operations elsewhere in the country.

Also hurting Lancaster and Pennsylvania dairy farmers is the fact that there are fewer milk-processing plants located in the state.

Even with one of the heaviest concentrations of milk in the United States, much of the milk produced here has to go out of state to be processed. That means higher transportation fees paid by dairymen, cutting into their profits.

Impact of PA plants

A recent study by the state Department of Agriculture and the Center for Dairy Excellence says that two cheese plants, perhaps in Reading and State College, would reduce overall supply-chain costs for farmers and use 4 million pounds of milk a day at each plant.

Both Gov. Tom Wolf and state Agriculture Secretary Russell Redding say they have been trying to get dairy processors to build milk or specialty processing plants.

Zimmerman notes that Pennsylvania in recent years lost a yogurt plant to New York and a cheese plant to Michigan.

"We have to compete and we're not. And now we're doing it at the cost of a Lancaster County tradition."

"Pennsylvania has to do a better job than that," Zimmerman says. "We have to compete and we're not. And now we're doing it at the cost of a Lancaster County tradition."

Exports of milk to Canada and foreign countries have fallen sharply, which also has contributed to lower milk prices. At the same time, countries such as New Zealand are competing with domestic dairies.

Even in Pennsylvania, milk produced in other states is flooding into the state because of favorable minimum in-store prices.

Some dairymen blame cooperatives that they feel have gotten so large and powerful that they no longer represent small dairy farmers.

From left, Jack, Ally and Kimberly Miller of York Township take a selfie during Cow Appreciation Day at Chick-fil-A in Springettsbury Township. Visitors who dressed in "anything cow like" were received a free entree on Tuesday.
Paul Kuehnel, York Daily Record